Maryland Lawmakers Eye Global Combined Reporting for Taxes

Maryland could become the first state to adopt worldwide combined reporting for corporate taxes if a House of Delegates proposal survives skeptical Senate leadership in deliberations this week.

The House spending package, SB 362, includes a provision mandating the reporting system for multinational companies—an apportionment method that requires calculating taxes based on global income attributable to a specific jurisdiction. Proponents favor a worldwide system to prevent corporations shifting profits to overseas subsidiaries.

After the House passed the bill last week in an 89-45 vote, Senate President Bill Ferguson (D) told reporters that combined reporting was a “hard no,” saying that the Senate “had been clear” on its position for months and that “nothing had changed.” Ferguson, who has come out against either global combined reporting or a “water’s edge” version, which requires reporting income just from US subsidiaries, didn’t respond to a request for comment Monday.

The Senate is likely to reject a number of provisions of the spending bill, presumably among them the corporate reporting measure, setting the stage for a conference later this week to resolve differences between the chambers.

Maryland lawmakers have previously tried to establish a water’s edge reporting system. But now they are considering the much broader approach, proposing to require affiliated businesses to submit a combined income tax return starting in tax year 2028, reflecting the aggregate income tax liability of all members of the combined group.

The new apportionment method would generate additional revenue—according to a report from the House Appropriations Committee, $65.3 million by 2028 and $224.6 million by 2029.

Worldwide combined reporting has attracted attention after Minnesota’s near-enactment of such a system last year. Lawmakers there are currently considering a bill mandating a study of the potential impact of that system. The New Hampshire House also deliberated on a bill but ultimately didn’t approve the calculation method earlier this year. Similar legislation, SB 1934, has been introduced in Tennessee, and and there is a draft bill in Vermont.

House ‘Forces’ Negotiation

Andrew Griffin, senior vice president of government affairs at the Maryland Chamber of Commerce, referred to the House amendment as “an attempt to force the state Senate into negotiating on the issue.”

“I think that the House is attempting to force the Senate to negotiate on it, and I don’t think the Senate is going to negotiate. I think the negotiation from their perspective is ‘This is coming off the table,’” Griffin said in an interview Monday.

He raised concerns about whether the state could overcome the hurdles of “potential violations of international treaties’’ and other countries’ tax laws. He also said Maryland is directly competing with states such as North Carolina, Virginia, and Pennsylvania, which haven’t adopted combined reporting, and the chamber opposes creating “additional hurdles” when the cost of doing business in the state is “already high and uncompetitive.”

Griffin also expressed skepticism about the Maryland Comptroller’s office’s capacity to process, audit, and administer worldwide combined returns, stating that there is “simply no way” they could handle it, even three years from now.

Don Griswold, senior fellow on the state fiscal policy team at the Center on Budget and Policy Priorities, said worldwide combined reporting is “complete reporting,” as it mandates the reporting of all profits globally, followed by the calculation of Maryland’s apportioned share of those profits, which he believes accurately reflects “economic reality.”

He contends that such a system promotes tax fairness by establishing a “level playing field” for all businesses and discouraging tax avoidance strategies.

“Right now, the law discriminates against Maryland’s small businesses. They can’t set up shell companies in tax havens and engage in offshore profit shifting, and even if they wanted to, they can’t do that,” Griswold said in an interview.

Maryland’s corporate income tax, like that of many other states, piggybacks on the federal tax calculation, meaning that profit-shifting for federal tax avoidance also leads to tax avoidance in Maryland, he said.